It takes a very long time to gain return on investments when someone takes a loan to build rentals. This means that a better idea would be to invest in things that return capital quickly. In Kenya, there is a worrying trend of arable lands giving away concrete areas, which, according to experts, will be a major threat to the food security of our country if the trend continues. Also, the struggle by most Kenyans, if not everyone, to own a piece of real estate has been said to be an unwise financial investment if at all you want returns.
Mr John Njoroge, a drug specialist who has invested in land, told the Bizna Kenya in an interview numerous individuals place a high premium on plots since they are more affordable than enormous parcels of land. “It is basic for individuals to secure plots and put a few rental units or condos because contrasted with putting that land to farming use, there is little regarding repetitive spending,” he said.
He also added that various factors make property investment challenges. While it seems that the players in real estate are making huge profits, several factors may make an investor not get as high yields or as quick as expected.
“Let’s say you bought an eighth of an acre for Sh2 million and took a bank loan of an equal amount to put up eight single rental units. Let’s assume each unit goes for Sh3,000 per month. This translates to Sh24,000 monthly and Sh 288,000 annually, provided the units have full occupancy throughout the year, but this is far from reality,” he told Bizna Kenya.
Moreover, during tax collection, land rates and other related costs like credit repayment plus its interest and the maintenance costs are figured in, it takes longer for an investor to start earning profits from the investment.
“Many investors don’t profit from their investments right away. It may be a very long time before they understand any substantial advantages. On the off chance that you take credit of, express Sh100 million to set up a condo block, it can take you around 40 years to clear the equivalent, even though interest rates could see you pay substantially more than this,” he says.
Mr Njoroge says that most new investors are waiting for the market to change and may well profit from it but the political atmosphere and insecurity in certain territories may see the estimation of the property coming down.
Mr Peter Kamau, a horticulturalists in Nakuru, says there are numerous misunderstandings about the land. He is disturbed that soon, Kenya could turn into a net food importer, if how land is being partitioned and used to set up private and business buildings is anything to pass by.
“Great horticulturally futile land is disappearing as structures mushroom all over the place. There are different investments separated from land that can be put to with significant yields than what rental units normally get every year,” he says.
He then advises that there should be a strategy to safeguard food security. He gave an example of China where houses are built in areas of less fertility while the large fertile pieces of land are used for agriculture.